Continued: Cash for Clunkers: Federal rebate revs up buyers

Car dealers across the Twin Cities area reported busy showrooms and low inventories Tuesday as customers scrambled to unload their old gas guzzlers and save $3,500 or $4,500 on a new, more fuel-efficient car under the federal government's $1 billion Cash for Clunkers program.

At Morrie's Minnetonka Ford/Lincoln/Mercury, the receptionist started a waiting list for the finance department, the first time she ever had to do so. One dealership in Coon Rapids ran out of two of the eligible cars, the Jeep Patriot and Compass.

But dealers reported problems with the government's online system to get the transactions approved by the National Highway Traffic Safety Administration (NHTSA), which is running the program.

Scott Lambert, vice president of the Minnesota Auto Dealers Association, said he was "astounded" to learn at a meeting Tuesday representing about 150 Minnesota dealers that not one has had a deal approved.

"We had dealers representing 1,500 to 2,000 transactions," he said. "We asked how many had a deal approved yet, and not one hand went up."

Lambert said the government has created a program that's "so big and cumbersome that it can't find a way to accept anything. We're sending in good, reliable deals."

It's nerve-racking for the dealers, he said, because they have given the customer $4,500 and now the dealers need to be reimbursed.

Some dealerships, including Morrie's, are letting customers drive their cars home before the government OKs the deal. Morrie's general manager John Aretz said the customer can return the car if the deal is not approved.

NHTSA did not immediately return a phone call seeking comment.

The program took effect July 1, but traffic at dealerships is up now because dealers had been reluctant to participate until the rules were published, which happened Friday. The program expires once the $1 billion is gone or Nov. 1, whichever comes first, prompting many to take advantage early.

Dale Skreen, of Loretto, was among those waiting at Morrie's showroom, ready to turn over the title and key to his 1993 Ford F-150, which gets 12 miles per gallon, so he could drive off in a new one. He didn't know the exact mileage of it, only that its mpg rating qualified for the program.

"I figure the truck is only worth about $700 and they're giving me $4,500," so it's a pretty good deal, said Skreen, 58, who works in public works for the city of Orono.

Nationwide, about 250,000 cars are expected to be junked, helping to spur sales at a time when industry sales are down 35 percent. Lambert said he expected about 3,000 to 4,000 new cars would be sold in Minnesota as part of the program.

Shrinking inventory

Lambert said many dealerships had thinned out their inventory this summer, leaving many sought-after vehicles in the program hard to get.

Aretz, the general manager at Morrie's, said trading among dealerships is huge right now as they try to get customers the car they want.

"Everybody had normal levels of inventory, then you throw this campaign out there," and it does have an impact, he said. "Supply and demand will become an issue as this goes on."

Another factor that could be keeping inventories low: production cuts by automakers. Chrysler shut down its factories for two months after it filed for bankruptcy this spring.

Brian Zins, a manager at Coon Rapids Chrysler Jeep, said they have sold out of the Patriot and Compass, but have other vehicles that qualify for the program.

"Because the inventory was low going in on those vehicles, they sold out right away," he said, adding that he did not know how many sold through the program.

Asked if there were any concerns dealerships might run out of qualifying cars, he laughed and said: "I think they'll run out of money before they run out of cars."

In limbo in Ottertail

But Nicole Lalum, of rural Ottertail in west-central Minnesota, said she and her husband started looking this weekend for a four-door car -- "any four-door car," as she put it -- but was finding them in short supply in outstate dealerships.

Lalum and her husband ended up at Nereson Chevrolet in Detroit Lakes, where they are still waiting to see if they can trade in her '95 Blazer for a Chevy Cobalt.

"It's sitting on their back lot," she said. "They're waiting for approval from the government on the rebate voucher, or rejection or whatever. So I'm waiting."

Skip Craigslist

Hours after they got divorced, Kim and Bob Young, of Minnetonka, sat with their feet up outside Morrie's, waiting for the financing department so they could trade in their kids' beater car, a 1997 Dodge Caravan with 140,000 miles on it that was paid off "long ago."

They originally planned to sell it for $1,500 on Craigslist but decided to trade it in under the program. They received a $3,500 rebate toward a new Ford Focus for Kim. Bob Young said he held his nose as he took advantage of the program.

"It irks me for the government spending. But I feel that if we qualify and with the taxes that we pay that it's our obligation to take advantage of it," he said.

They said that Kim had only two or three options for cars because of the reduced inventory and that they acted early out of concern that the $1 billion could go quickly.